LAS VEGAS--(BUSINESS WIRE)--June 6, 2007--Shuffle Master, Inc.
(NASDAQ Global Select Market: SHFL) today announced its results from
continuing operations for the second quarter and six months ended
April 30, 2007.
Second Quarter financial/operating highlights:
-- Revenue, adjusted EBITDA and GAAP earnings per share from
continuing operations totaled $44.6 million, $13.7 million and
$0.10, respectively.
-- Cash and cash equivalents totaled $7.1 million as of April 30,
2007 compared with $3.0 million as of January 31, 2007 and
$8.9 million as of October 31, 2006.
-- Net debt (total debt, less cash and cash equivalents) as of
April 30, 2007 totaled $219.9 million compared to $227.7
million as of January 31, 2007 and $227.1 million as of
October 31, 2006.
-- Capital deployment initiatives included capital expenditures
of $3.6 million and debt payments of $6.1 million.
-- Total revenue contribution from Stargames products totaled
$13.9 million, a sequential quarter increase of $3.8 million
from $10.1 million.
-- A decrease in gross margins and operating margins compared to
last year. The decrease in gross margins was primarily due to
product sales mix, namely the contribution from lower margin
sales of Stargames slot product and to a lesser extent,
electronic table game sales. Operating margins were lower
primarily due to increased R&D at Stargames and to a lesser
extent, an increase in overall SG&A to support current growth
initiatives.
-- Total shuffler installed base increased 17% over last year to
23,852.
-- Total shuffler sales of 1,044 units, of which 15% or 152
units, represented replacements of older generation shufflers.
-- Third generation MD2 and one2six shuffler installed base
increased 97% to 3,026 and 44% to 4,291, respectively.
-- Leased shuffler installed base increased 63 units
sequentially, due primarily to fewer conversions of leased
units to sold units.
-- Total proprietary table game installed base increased 21% over
last year to 4,599.
-- Leased proprietary table game installed base increased 164
units sequentially, resulting in a 5% sequential increase in
proprietary table game lease revenue. The increase in leased
units and lease revenue resulted primarily from fewer
conversions of leased units to lifetime license sales. Note
that the 164 sequential units represent the largest sequential
quarterly increase in our history, other than as the result of
an acquisition.
-- The installed base for Three Card Poker and Ultimate Texas
Hold'em, the Company's fastest growing table game, increased
11% to 1,406 and 154% to 206, respectively.
-- Total electronic table game installed base of 5,153 seats
increased 31% over last year and 4% sequentially.
-- Leased electronic table game installed base of 634 seats
increased 196% over last year and 5% sequentially.
Year-To-Date financial/operating highlights:
-- Revenue, adjusted EBITDA and GAAP earnings per share from
continuing operations totaled $82.0 million, $24.5 million and
$0.15, respectively.
-- Capital deployment initiatives included capital expenditures
of $6.9 million, debt payments of $13.9 million and share
repurchases of $1.9 million.
-- Total revenue contribution from Stargames products totaled
$24.0 million.
-- A decrease in gross margins and operating margins compared to
last year. The decrease in gross margins is primarily due to
product sales mix, namely the contribution of lower margin
sales of Stargames slot product and to a lesser extent,
electronic table game sales. Operating margins were lower
primarily due to the inclusion of Stargames operating costs
resulting from the acquisition which was effective on February
1, 2006. To a lesser extent, operating expenses were adversely
affected due to an overall increase in SG&A to support current
growth initiatives.
Significant items included in the current quarter and year-to-date
financial results:
-- As a result of the weakening US dollar versus the Australian
dollar and the Euro, foreign currency impact totaled a $1.0
million loss during the quarter and $1.1 million loss during
the year and is included in Other income (expense).
-- A minimum royalty accrual in the current quarter totaling
$950,000, which represents royalties that may be payable to
WMS in the future, subject to future sales levels of WMS
branded slot content on our Stargames slot machine platform.
The royalty accrual is included in Cost of sales and service.
Mark L. Yoseloff, Chairman and Chief Executive Officer, commented
that, "Today's quarterly results, although characterized by short-term
profitability issues compared to last year, did see significant top
and bottom line improvement over the first quarter of fiscal 2007. In
addition, our operating results contained a number of positive data
points which highlight the strength of our underlying fundamentals."
Yoseloff continued, "In a more general sense, we are pleased to have
recently completed a review of our long-term strategy and believe that
we are uniquely positioned to re-accelerate growth and drive
long-term, sustainable profitability as we look to fiscal 2008 and
beyond. That said, we do expect to see moderate improvement in the
back half of the year, however, the remainder of fiscal 2007 will be
characterized by addressing near-term challenges and staying the
course in order to achieve our long-term objectives. For that reason,
we will continue with our previously communicated suspension of fiscal
2007 earnings guidance."
Other operating highlights included:
-- In late April 2007, the company announced key product and game
approvals for its Table Master and Vegas Star electronic table
platforms. Subsequently, as of the date of this release, the
company has placed 130 Table Master seats on lease at
Pennsylvania Racinos and 70 seats of Table Master and 50 seats
of Vegas Star on lease to a Native American casino in Michigan
for use in its first virtual casino.
-- Our leased installed base of our proprietary table game
Ultimate Texas Hold'em ended the quarter at 206 tables,
surpassing 200 tables in less time than any game in our
history.
-- In early April 2007, we received regulatory approval to place
our first proprietary table games in Arizona and subsequently
have placed 28 tables on lease. We currently estimate the
overall market potential to be 60 tables.
-- During the past few months, we have been beta testing our
iDeal shuffler and customer feedback thus far has been very
positive. At the present time, we expect to submit the iDeal
with card recognition to the Nevada and GLI gaming labs in
late June 2007, with an expectation of 45-60 days from that
point to receive the requisite regulatory approvals. Further,
we will soon commence with the initial pilot production of the
iDeal shuffler.
-- During the quarter, sales of our MD2 shufflers with card
recognition technology totaled 218 units, representing a new
quarterly record for this product. The majority of these
shufflers were sold in Macau, where the security features of
the optical card recognition capability is proving to be
extremely important to Macau casino operators. At the present
time, we are also in the process of upgrading approximately
300 previously sold MD2 shufflers in Macau with optical card
recognition.
-- In late May 2007, the company announced its product line-up
for the G2E Asia Gaming Expo in Macau in mid-June 2007.
Product highlights include Stargames' Vegas Star Sling Shot
Roulette, the first automated roulette game featuring a live
ball and live roulette wheel on our Vegas Star platform. Also,
Rapid Baccarat, utilizing our iShoe card reading shoe to
authenticate each game's outcome; progressive versions of the
our proprietary table games, including our popular Three Card
Poker and Ultimate Texas Hold'em table games and the iDeal
shuffler, boasting a shuffler speed over 40% faster than
existing single deck shufflers and featuring card recognition
technology that reads the rank and suit of each card, which
can be used to authenticate jackpot hands.
Shuffle Master, Inc. will hold a conference call on Wednesday,
June 6, 2007 at 2:00 PM Pacific Time to discuss the results of
operations for the second quarter and six months ended April 30, 2007.
The domestic toll-free dial-in number for the call is 1-877-407-9039,
and the international dial-in number is 1-201-689-8359; request
"Shuffle Master's Second Quarter 2007 Conference Call." The call will
also be webcast by CCBN and can be accessed at Shuffle Master's web
site www.shufflemaster.com. Immediately following the call and through
June 13, 2007, a playback can be heard 24-hours a day by dialing
1-201-612-7415; account number is 3055; conference I.D. number is
244068.
Shuffle Master, Inc. is a gaming supply company specializing in
providing its casino customers Utility Products, including automatic
card shufflers, roulette chip sorters and intelligent table system
modules, to improve their profitability, productivity and security,
and Entertainment Products, including live proprietary table games,
electronic multi-player table game platforms, traditional video slot
machines for select markets, live table game tournaments and wireless
gaming solutions to expand their gaming entertainment content. The
Company is included in the S&P Smallcap 600 Index. Information about
the Company and its products can be found on the Internet at
www.shufflemaster.com.
This release contains forward-looking statements that are based on
management's current beliefs and expectations about future events, as
well as on assumptions made by and information available to
management. The Company considers such statements to be made under the
safe harbor created by the federal securities laws to which it is
subject, and assumes no obligation to update or supplement such
statements. Forward-looking statements reflect and are subject to
risks and uncertainties that could cause actual results to differ
materially from expectations. Risk factors that could cause actual
results to differ materially from expectations include, but are not
limited to, the following: changes in the level of consumer or
commercial acceptance of the Company's existing products and new
products as introduced; increased competition from existing and new
products for floor space in casinos; acceleration and/or deceleration
of various product development, promotion and distribution schedules;
product performance issues; higher than expected manufacturing,
service, selling, legal, administrative, product development,
promotion and/or distribution costs; changes in the Company's business
systems or in technologies affecting the Company's products or
operations; reliance on strategic relationships with distributors and
technology and manufacturing vendors; current and/or future
litigation, claims and costs or an adverse judicial finding; tax
matters including changes in tax legislation or assessments by taxing
authorities; acquisitions or divestitures by the Company or its
competitors of various product lines or businesses and, in particular,
integration of businesses that the Company may acquire; changes to the
Company's intellectual property portfolio, such as the issuance of new
patents, new intellectual property licenses, loss of licenses, claims
of infringement or invalidity of patents; regulatory and
jurisdictional issues (e.g., technical requirements and changes,
delays in obtaining necessary approvals, or changes in a
jurisdiction's regulatory scheme or approach, etc.) involving the
Company and its products specifically or the gaming industry in
general; general and casino industry economic conditions; the
financial health of the Company's casino and distributor customers,
suppliers and distributors, both nationally and internationally; the
Company's ability to meet its debt service obligations, including the
Company's senior convertible notes and its senior secured revolving
credit facility, which will depend on its future performance and other
conditions or events and will be subject to many factors that are
beyond the Company's control; various risks related to the Company's
customers' operations in countries outside the United States,
including currency fluctuation risks, which could increase the
volatility of the Company's results from such operations; and the
Company's ability to successfully and economically integrate the
operations of any acquired companies, such as Stargames. Additional
information on these and other risk factors that could potentially
affect the Company's financial results may be found in documents filed
by the Company with the Securities and Exchange Commission, including
the Company's current reports on Form 8-K, quarterly reports on Form
10-Q and annual report on Form 10-K.
SHUFFLE MASTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
April 30, April 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue:
Utility products leases $5,889 $6,084 $11,885 $12,094
Utility products sales and
service 16,211 17,531 28,000 33,406
Entertainment products leases
and royalties 7,177 6,475 14,179 12,730
Entertainment products sales
and service 15,310 13,177 27,830 18,345
Other 57 36 91 45
--------- --------- --------- ---------
Total revenue 44,644 43,303 81,985 76,620
--------- --------- --------- ---------
Costs and expenses:
Cost of leases and royalties 3,904 2,742 7,567 5,559
Cost of sales and service 14,065 11,712 24,570 18,816
Selling, general and
administrative 14,308 13,363 28,878 23,360
Research and development 4,503 3,239 8,400 5,200
In-process research and
development - 19,145 - 19,145
--------- --------- --------- ---------
Total costs and expenses 36,780 50,201 69,415 72,080
--------- --------- --------- ---------
Income (loss) from operations 7,864 (6,898) 12,570 4,540
Other income (expense) (2,757) (2,337) (4,748) (2,827)
Equity method investment loss (120) (156) (261) (156)
--------- --------- --------- ---------
Income (loss) from continuing
operations before tax 4,987 (9,391) 7,561 1,557
Provision for income taxes 1,560 3,241 2,183 6,971
------------------- --------- ---------
Income (loss) from continuing
operations 3,427 (12,632) 5,378 (5,414)
Discontinued operations, net
of tax 13 (88) 87 47
--------- --------- --------- ---------
Net income (loss) $3,440 $(12,720) $5,465 $(5,367)
========= ========= ========= =========
Basic earnings (loss) per
share:
Continuing operations $0.10 $(0.37) $0.16 $(0.16)
Discontinued operations - - - -
--------- --------- --------- ---------
Net income (loss) $0.10 $(0.37) $0.16 $(0.16)
========= ========= ========= =========
Diluted earnings (loss) per
share:
Continuing operations $0.10 $(0.37) $0.15 $(0.16)
Discontinued operations - - - -
--------- --------- --------- ---------
Net income (loss) $0.10 $(0.37) $0.15 $(0.16)
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 34,696 34,555 34,663 34,522
Diluted 35,336 34,555 35,465 34,522
SHUFFLE MASTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
April 30, October 31,
2007 2006
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $7,135 $8,906
Investments 13 11
Accounts receivable, net of allowance for
bad debts of $778 and $1,422 31,667 32,662
Investment in sales-type leases and notes
receivable, net 9,806 10,064
Inventories 33,015 24,658
Prepaid income taxes 3,224 1,138
Deferred income taxes 7,487 6,785
Other current assets 5,679 5,172
------------ -------------
Total current assets 98,026 89,396
Investment in sales-type leases and notes
receivable, net 9,297 11,510
Products leased and held for lease, net 11,879 11,282
Property and equipment, net 10,488 9,779
Intangible assets, net 78,617 77,904
Goodwill 96,991 91,700
Deferred income taxes 5,202 4,294
Other assets 10,362 9,342
------------ -------------
Total assets $320,862 $305,207
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $9,574 $11,217
Accrued liabilities 11,757 11,326
Customer deposits 2,379 2,017
Deferred revenue 7,954 5,499
Income taxes payable 1,239 938
Notes payable and current portion of long-
term liabilities 3,911 77,294
------------ -------------
Total current liabilities 36,814 108,291
Long-term liabilities, net of current
portion 223,157 158,753
Deferred income taxes 6,533 5,614
------------ -------------
Total liabilities 266,504 272,658
------------ -------------
Commitments and contingencies (Note 12)
Shareholders' equity:
Preferred stock, no par value; 507 shares
authorized; none issued or outstanding - -
Common stock, $0.01 par value; 151,875
shares authorized; 35,219 and 34,895
shares issued and outstanding 352 349
Additional paid-in capital 4,989 717
Retained earnings 27,856 22,391
Accumulated other comprehensive income 21,161 9,092
------------ -------------
Total shareholders' equity 54,358 32,549
------------ -------------
Total liabilities and shareholders' equity $320,862 $305,207
============ =============
SHUFFLE MASTER, INC.
SUPPLEMENTAL DATA
(Unaudited)
UTILITY SEGMENT -- UNIT DATA
Three Months Ended Six Months Ended
April 30, April 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Shufflers installed base (end
of period)
Lease units 4,633 4,630 4,633 4,630
--------- --------- --------- ---------
Sold units, inception-to-
date:
Beginning of period 18,245 14,580 17,630 13,780
Sold during period 1,044 1,293 1,795 2,250
Less trade-ins and
exchanges (70) (135) (206) (292)
--------- --------- --------- ---------
End of period 19,219 15,738 19,219 15,738
--------- --------- --------- ---------
Total installed base (a) 23,852 20,368 23,852 20,368
--------- --------- --------- ---------
Chipper installed base (end of
period)
Lease units 10 10 10 10
--------- --------- --------- ---------
Sold units, inception-to-
date
Beginning of period 646 519 620 368
Sold during period 13 17 39 168
--------- --------- --------- ---------
End of period 659 536 659 536
--------- --------- --------- ---------
Total installed base (a) 669 546 669 546
========= ========= ========= =========
(a)Installed Base is the sum of product units / seats under lease or
license agreements and inception-to-date sold units / seats.
Management believes that installed units is an important gauge of
segment performance because it measures historical market
placements of leased and sold units and it provides insight into
potential markets for service and next generation products. Some
sold units may no longer be in use by the Company's casino
customers or may have been replaced by other models. Accordingly,
the Company does not know precisely the number of units currently
in use.
SHUFFLE MASTER, INC.
SUPPLEMENTAL DATA
(Unaudited)
ENTERTAINMENT SEGMENT -- UNIT DATA
Three Months Ended Six Months Ended
April 30, April 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Table games installed base (end
of period)
Royalty units 3,239 2,952 3,239 2,952
--------- --------- --------- ---------
Sold units, inception-to-
date
Beginning of period 1,312 833 1,233 768
Sold during period 48 31 127 96
--------- --------- --------- ---------
End of period 1,360 864 1,360 864
--------- --------- --------- ---------
Total installed base (a) 4,599 3,816 4,599 3,816
========= ========= ========= =========
Multi-terminal gaming machine
seats installed base (end of
period)
Lease seats 634 214 634 214
--------- --------- --------- ---------
Sold seats, inception-to-
date
Beginning of period 4,345 430 4,142 300
Sold during period 194 249 397 379
Less trade-ins and
exchanges (20) - (20) -
Stargames installed based
at the acquisition date - 3,031 - 3,031
--------- --------- --------- ---------
End of period 4,519 3,710 4,519 3,710
--------- --------- --------- ---------
Total installed base (a) 5,153 3,924 5,153 3,924
========= ========= ========= =========
Electronic gaming machine seats
installed base (end of period)
Lease seats - - - -
--------- --------- --------- ---------
Sold seats, inception-to-
date
Beginning of period 16,720 - 16,279 -
Sold during period 721 281 1,162 281
Stargames installed based
at the acquisition date - 14,672 - 14,672
--------- --------- --------- ---------
End of period 17,441 14,953 17,441 14,953
--------- --------- --------- ---------
Total installed base (a) 17,441 14,953 17,441 14,953
========= ========= ========= =========
(a)Installed Base is the sum of product units / seats under lease or
license agreements and inception-to-date sold units / seats.
Management believes that installed units is an important gauge of
segment performance because it measures historical market
placements of leased and sold units and it provides insight into
potential markets for service and next generation products. Some
sold units may no longer be in use by the Company's casino
customers or may have been replaced by other models. Accordingly,
the Company does not know precisely the number of units currently
in use.
SHUFFLE MASTER, INC.
SUPPLEMENTAL DATA
(Unaudited, in thousands)
FINANCIAL DATA
Three Months Ended Six Months Ended
April 30, April 30,
--------------------- -------------------
2007 2006 2007 2006
---------- ---------- --------- ---------
Reconciliation of income from
continuing operations to
EBITDA:
Income from continuing
operations $3,427 $(12,632) $5,378 $(5,414)
Other expense 2,757 2,337 4,748 2,827
Share-based compensation 1,288 1,235 2,729 2,546
Equity method investment
loss 120 156 261 156
IPR&D, Stargames
acquisition - 19,145 - 19,145
Provision for income taxes 1,560 3,241 2,183 6,971
Depreciation and
amortization 4,593 4,279 9,165 7,608
---------- ---------- --------- ---------
EBITDA from continuing
operations (b) $13,745 $17,761 $24,464 $33,839
========== ========== ========= =========
(b)Adjusted EBITDA (defined as income from continuing operations
before other expense, provision for income taxes, depreciation,
amortization, share-based compensation, in-process research and
development and equity method investment loss) is not a financial
measure calculated in accordance with GAAP and should not be
considered as an alternative to income from operations as a
performance measure. Adjusted EBITDA is presented solely as a
supplemental disclosure because management believes it is a useful
performance measure and widely used within its industry. Adjusted
EBITDA is not calculated in the same manner by all companies and,
accordingly, may not be an appropriate measure for comparison.
CONTACT: Shuffle Master, Inc., Las Vegas
Mark L. Yoseloff, Ph.D., or Richard Baldwin, 702-897-7150
Fax: 702-270-5161
or
Investor Relations Advisor
Tom Ryan, 203-682-8200
Fax: 203-682-8201
SOURCE: Shuffle Master, Inc.
